Sasol’s $12.8bn US project reaches finish with last unit
JOHANNESBURG - Sasol has completed its Lake Charles Chemicals Project in Louisiana after struggling though issues ranging from mismanagement to cost overruns and a final onslaught of hurricanes in the US Gulf Coast.
The South African chemicals and fuel maker on Nov. 15 achieved beneficial operation of a low-density polyethylene unit, or LDPE, that had been damaged in a fire during commissioning in January, it said in a statement. “The LCCP is now 100 percent complete” with total capital expenditure forecast to be within $12.8 billion (R197.09 billion), it said.
Sasol took a final investment decision on Lake Charles in 2014 at an estimated $8.9 billion, drawn to America’s shale boom and boosting chemicals production. But the company’s reputation would be tarnished by the execution of LCCP. An internal probe last year found the project management team acted inappropriately, lacked experience and was overly focused on maintaining cost and schedule estimates instead of providing accurate information.
The company’s debt ballooned along with the cost of the project, causing Sasol to consider a rights offer and accelerate a disposal of global assets, including the sale of a $2 billion stake in the U.S. base-chemicals business to form a joint venture with LyondellBasell Industries NV. An explosion and fire on Jan. 13 at the LDPE unit led to a smaller contribution to earnings from Lake Charles as guidance and timelines were repeatedly adjusted.
“The completion of this unit and its impending transition to our joint venture with LyondellBasell will accelerate our transformation to a more specialty chemicals-focused company with a strong presence of base chemicals in our portfolio,” Sasol Chief Executive Officer Fleetwood Grobler said.
Main power was lost to the US site this year after Hurricane Laura hit on Aug. 27, according to Sasol. All units have returned to operation and there was no subsequent impact from Hurricane Zeta.
Shares in Sasol rose as much as 7.6 percent before paring gains to trade 3.7 percent up by 9:17 a.m. in Johannesburg. The stock has declined 64 percent this year.
The build created more than 800 full-time manufacturing jobs, with up to 6,500 people on site during construction, the company said.